Top 5 Mistakes to Avoid While Taking a Personal Loan
The need for a personal loan can arise at any time. Thanks to online lenders, getting a loan today is incredibly easy. Despite the ease of availability, there are certain mistakes that applicants make which cost them dearly later.
This infographic highlights the top 5 costly mistakes to steer clear of while taking a loan.
1. Not Comparing Different Loan Options
Plenty of lenders offer loans at different rates. Choosing the first loan you find may not always be the best option. Why not shop around and choose the most economically viable loan?
However, be wary of ‘applying’ for too many loans at the same time as this could reduce your credit score. More on this below.
2. Not Understanding Your Repayment Capacity
Before taking a loan, it is crucial to know how much you can afford to spend on EMIs. The amount you spend should not significantly affect your existing quality of life. A good way to find out your approximate EMI amount is by using a personal loan EMI calculator.
3. Not Reading the Terms and Conditions
The fine print in any agreement contains a wealth of information that should not be ignored.
The next time you get a loan, ensure that you read all the terms and conditions in the agreement thoroughly, before committing.
4. Applying for Multiple Loans at the Same Time
While you are advised to look at the different rates offered by lenders, applying for multiple loans at the same time is not recommended. When the lender processes your application, a hard enquiry is made. Multiple hard enquiries could reduce your credit score over time.
5. Opting for a Longer Tenure
You may assume that a long tenure will reduce your repayment amount. While your EMI will be on the lower side, the amount you pay as interest throughout the tenure will definitely be higher. Therefore, opt for a short tenure as much as possible.
In Summary
A personal loan comes with a lot of benefits and is one of the most versatile forms of credit available. However, despite the ease of access and the transparency offered, it is important to keep certain points in mind to have a smoother repayment experience.
If you are looking for a personal loan that offers minimal documentation and no hidden charges, check out moneyview loans.
Are there any other mistakes that one can avoid while taking a loan? Let us know in the comments below.